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Originally paved in 1861 as part of the highway to Jaffa, the road quickly became a focal point for the 19th century expansion out of Jerusalem's Old City walls, and early neighbourhoods like the Russian Compound, Nahalat Shiva, and Mahane Yehuda blossomed around it, as well as Shaare Zedek hospital. Proximity to the artery quickly became a measure of real-estate value in the booming city. Traffic originally consisted of camels and mules, and the route was eventually improved enough to allow for horse-drawn carriages. The German Templers, who established the German Colony, first began a regular carriage service along the road to Jaffa.

Jaffa Road after 1907

During the period of the British Mandate, the street was further developed with the establishment of many central institutions including the city hall, the city's central post office, the Anglo-Palestine Bank, and the Generali office building. The buildings on its easternmost end constructed along the Old City walls were destroyed in July 1944 so as not to obscure the city's historic view. During this period the street took on its modern shape, and it became the heart of the city's developing central business district as most commerce left the Old City. During the city's 19-year division between Israel and Jordan after the 1948 Arab-Israeli War, which separated the Old City from much of modern Jerusalem, Jaffa Road's primacy as the city-centre was unchallenged.

For much of its hundred-year existence, Jaffa Road has served as Jerusalem's central artery. The municipality responded to problems in the struggling city-centre through focused efforts to redevelop the street; Jaffa Road was limited to public transit (buses and taxis) in an attempt to divert traffic congestion from the area, and became the centrepiece of a new development plan for revitalising the downtown. A tunnel was excavated under the street at Tzahal Square in 2004 to allow the city's central north-south route to bypass it.[3] In order to accommodate the new system, new utility lines were laid under one side of the road, which was also widened. 180 properties were evacuated to allow for the road's improvement.